Why am I paying trail commission ?

wooder

Briefly - back in 2009 I had a hotch potch of personal pensions which I had been paying into over the years. I had a meeting with the IFA connected with my accountants and he advised putting them all together in one private pension with Skandia - which I agreed to.
I had one further meeting, which I think was about 2011, when he advised a switch to OMW Spectrum 5 fund, which I also agreed to.

A year or two after that I got interested in finance and investments generally and after quite a lot of reading and research I decided to take control myself. Initially I started a s&s ISA and then last year I took control of my pension fund and switched to a better investment (very easy to do btw, on the OMW website). At the time, as I was keen to minimise charges, I asked OMW what I needed to do to stop paying trail commission and was told that I just needed to tell them that the financial adviser was no longer acting for me and the payments would stop.

I did.... but they didn't.

I phoned and spoke to OMW and they said that as there was no FA acting then I shouldn't be paying trail commission and that it definitely wasn't going to my previous FA.

Fast forward six months and I've just received my half-year statement and yes, you guessed, trail commission still being deducted.

Anyone any idea why ?

warwicktiger

The policy fees are almost certainly continuing to be deducted, but may not be being paid to the (ex) advisor. Your policy has not and will not be changed

wooder

Ok, so I think I'm on CB1 and the terms state:-

Charge Basis 1
• This applies to accounts or bonds opened before
18 December 2012, which have not since
converted to a different Charge Basis either by
request or automatically*.
• The Investor Charge applies to these accounts/
bonds and financial advisers are entitled to
receive commission.
• We use part of any rebates we receive from fund
managers to pay ‘trail commission’ to financial
advisers.
• If the rebates for your funds exceed any trail
commission due to your adviser, they will be
reinvested into your investment; the reinvestment
of rebate payments is shown as a ‘customer
account credit’.**
Further information on Charge Basis 1 is available
from your financial adviser or at the following link:

According to these terms it would seem that any trail commission that is not due to the FA will be re-invested back into my investment but... I can only see deductions on my statement, no credits ?

I already pay an investor charge on the pension and also I pay 0.5% more for the investment because it's an OMW pension platform than I do with the ISA (same investment) - if I also have to pay trail commission then it's borderline whether I would be better to just have it all in the ISA.

AnotherJoe

Just move to another SIPP provider. Plenty out there.

dunstonh

Anyone any idea why ?

A 2009 case would have natural fund based commission priced into the funds (Charge basis 1) or nominated annual commission (Charge basis 2). Both of which used bundled priced funds. So, whilst OMW can deselect the adviser, which will stop the commission being paid, it will not mean the commission stops.

There are multiple things that could happen here:
1 - the commission is paid to the provider (most common when you instruct that the adviser is no longer to be paid).
2 - they change your charge basis off 1 to 2 or 3 so the commission is rebated

If you are on charge basis 1, then you wouldnt see the commission on your statement as funds are bundled and commission is not shown explicitly. To set the figure to nil commission, it would need to be on CB2 or CB3

I already pay an investor charge on the pension and also I pay 0.5% more for the investment because it's an OMW pension platform than I do with the ISA (same investment) - if I also have to pay trail commission then it's borderline whether I would be better to just have it all in the ISA.

You pay 0.50% more because you have either chosen not to have an adviser allocated. So, the provider has to do the admin work and an additional cost exists for it or you have changed charge basis to have a platform charge. A CB1 pension via an adviser does not that extra 0.5%. Maybe its not CB1 but CB3 (which is unbundled charging). That has a platform charge. It is possible to have the different products within OMW on different charge basis. However, you can move one or both to CB3.

Just move to another SIPP provider. Plenty out there.

Pre RDR OMW pensions were the cheapest on the market place. I used them a heck of lot. 0.235% p.a. plus an annual charge of £68.50 (increased annually - its about £78 now) for fund and platform.

There is a lot of confusion in the OP's post. So, I wouldnt go moving the pension until that confusion has been cleared up.

wooder

Thanks for the replies - phone calls didn't seem to get me anywhere so I emailed the customer care centre at OMW and they have actually credited the trail commission deductions back to my account (it did show on the statement but... so many figures, I missed it). They have also assured me that no further deductions will be made as there is no adviser attached to my account.

I wouldn't actually want to move from OMW as I find their website very informative and easy to use and, apart from the annual investor charge and the extra 0.5% it costs to hold my investment on their platform, they have said that it won't cost anything to take money from the pension when the time comes.

Just for information - I am on CB1 and my pension is with Fundsmith, and growing fast. My s&s ISA is also with Fundsmith, but I buy direct from them so the ISA investment performs slightly (0.5%) better than the pension investment because obviously, if I buy direct there is no mark up for the middleman.

dunstonh

I wouldn't actually want to move from OMW as I find their website very informative and easy to use and, apart from the annual investor charge and the extra 0.5% it costs to hold my investment on their platform, they have said that it won't cost anything to take money from the pension when the time comes.

Have they verified where this extra 0.5% pa. comes from? It is not part of their published charges. As i said, i suspect it is because you removed the adviser but cant be sure.

wooder

It's because Fundsmith sells it's product direct - you don't need a platform to buy it, you just invest directly with them and the charge is a flat 1% - these are the 'T' class shares.

As far as I am aware they don't discount their product to other providers so if you buy Fundsmith via OMW or Hargreaves Lansdown etc. then they have to add their 0.5% on (or, presumably they wouldn't have a mark up), these are the 'R' class shares and so cost 1.5%

So, it costs 0.5% more to own Fundsmith via a pension provider but the tax break on the pension investment more than compensates for this.

To illustrate - if you invested £1000 direct when the fund was started in November 2010 then today it would be worth £2499.60 whereas if you invested via a provider (eg. OMW) then it would be worth £2431.70